This wiki will provide an in-depth overview of the management concept, management transparency. The wiki will explore the meaning, background, relevance as a concept today and delve into the aspects of management transparency more deeply. Moreover, the wiki will cover case studies, related outcomes, the paradoxes of management transparency and finally concluding on whether it can be considered a new trend in management.
WorldVenture, 2014
‘42% of people around the world are not sure whether to trust companies’ (The Guardian, 2014). Today, various stakeholders are demanding transparency from their organisation in order to understand and trust them (Wemeier and Raaz, 2012). Transparency is defined as ‘the extent to which a stakeholder perceives a firm’s conduct is open and forthright regarding matters relevant to the stakeholder’ (Dapko, 2012). In order for an organisation to become transparent, there must be direction from the management.
The term management transparency describes where managers reveal (both up the organisation and down) the decisions that they have made and why they are made (Pitsel, 2016). The definition of ‘transparency’ has expanded to include ‘openness’, ‘freedom of information’, ‘clarity’, ‘accuracy’, ‘truth’ and the timely release of relevant information, which should all be evident in a transparent management style (Collins, 2008; Hood, 2006; Schnackenberg and Tomlinson, 2014, cited in Bernstein, 2014). The definitional expansions have caused transparency to become one of the great themes in management theory today (Bernstein, 2014).
Management transparency highlights than an individual, like a key stakeholder should be able to observe the activity and reasons behind a decision. Observation has been a key aspect of management since the late 1920's and 1930's where Elton Mayo and team of researchers studied the effects of changes to the work environment (e.g. changes in lighting, work hours, rest breaks, and food eaten during breaks) on productivity (cited in Bernstein, 2014). Studying the changes in work environment was a preliminary investigation of management transparency, since the organisation were revealing why these changes were being implemented. The research found the famous, yet controversial findings of the Hawthorne Effect, where researches claimed that workers productivity increased when they knew they were being studied, which led to them examining workers as people to explain productivity (Bernstein, 2014). Examination of the workers as people was likely to lead to the investigation of management transparency, however, this would not be considered a concept until a later date. Further research may involve management transparency when investigating why individuals were employed (e.g. do they fit the company culture?), do employees work better when monitored by their management or does open communication with management improve productivity?
The European Directive was created in 2014, which requires businesses to disclose non-financial and diversity information to increase transparency (CSR Europe, 2014). This encouraged the move from management transparency being a concept, to a reality. Management are required to report on corporate issues such as human rights management, board diversity, sustainability approaches, due diligence, risk assessment and more (CSR Europe, 2014).
Scholars link management transparency to positive organisational outcomes and as a ‘antidote to mismanagement and corruption’ (Norman et al., 2010; von Furstenberg, 2001). However, many business leaders still fear that greater public disclosure will leave them vulnerable to criticism (The Guardian, 2014).
2. The Three Dimensions of Transparency
Despite most researching assuming transparency to be a un-dimensional construct, transparency is made up of three specific dimensions: information disclosure, clarity and accuracy (Schnackenberg and Tomlinson, 2014). Management should display these three dimensions in their leadership to appear transparent.
2.1 Information Disclosure
Perotti and von Thadden (2005) refer to information disclosure as the perception of transparency that is built around a stakeholder’s ability to gather needed information about a firm (cited in Schnackenberg and Tomlinson, 2014). Therefore, if management are unable to openly disclose information to a stakeholder, they cannot be transparent. Information disclosure also includes an explanation of why something’s go wrong, openly shared information and a manager disclosing their personal values, motives and sentiments in a manner that enables followers/subordinates to more accurately assess the competence and morality of their manager’s actions (Higgins, 2005; Schnackenberg and Tomlinson, 2014; Norman et al., 2010).
Annual reports are a form of organisational information disclosure. Most information provided by firms in their annual reports are not required by laws (Botosan, 1997 cited in Ferreira and Rezende, 2007). Ferreira and Rezende’s (2007) investigated voluntary disclosures of corporate strategies and developed a model where managers chose whether to reveal their strategic plans only to some stakeholders of the firm or also the outside world. The results of their investigation provide an understanding for managers of the costs and benefits of nonfinancial disclosures rather than the ‘potential benefits’.
They concluded that when managers voluntarily disclose private information about corporate strategy, they tend to ensure the information is credible since if incorrect it could damage their reputation. Moreover, managerial voluntary public disclosures of information can be value adding due to their positive effects on stakeholder incentives such as undertaking investment (Ferreira and Rezende, 2007). Their research suggests that in the last decade there has been an encouragement for managers to disclose information, rather than only considering it such as indicated by previous studies (Amir and Lev 1996; Narayanan et al., 2000 cited in Ferreira and Rezende, 2007).
2.2 Clarity
Clarity is regarded as the perceived level of lucidity and comprehensibility of information received from a sender with limited ambiguity (Schnackenberg and Tomlinson, 2014). Daft and Lengel (1986) found that a major problem for managers was the lack of information clarity rather than a lack of sheer data. Managers can improve clarity by removing concealed symbols and technical organisational jargon (Grunstra et al., 1965). The component of clarity is interactive with both the quantity of information disclosed and accuracy in management (Schnackenberg, 2002). Therefore, in order to for management to act transparently, followers must not only be able to see what is going on, but understand what is going on. Relevant information needs to be disclosed to employees in a way that they can comprehend.
2.3 Accuracy
Accuracy refers to information that is assumed to be correct in the circumstance, and therefore more reliable. It is assumed that most managers have an accurate perception of their organisation (Mezias and Starbuck, 2003). Information cannot be considered transparent or accurate if it is purposefully biased or unfoundedly contrived (Walumbwa et al., 2011). Moreover, if information is considered inaccurate, this will reduce management transparency and prompt corporate scandals (Akhigbe and Martin, 2006, cited in Schnackenberg and Tomlinson, 2014). Ferreira and Rezende’s (2007) investigation highlighted that good managers are those who disclose accurate information. If a manager suggests a given strategic direction for the firm and later decides to change it, they signal to the market that their initial information was not accurate (Ferreira and Rezende, 2007).
3. Case Studies
3.1 Joel Gascoigne - The Transparent Manager
Joel Gascoigne is the CEO of the social media management tool, Buffer (Buffer, 2017). Gascoigne has drawn attention to his organisation through his open, transparent approach to management. In an interview with Gascoigne, he described ‘transparency as the core value of Buffer, regardless of whether the organisation is seeing growth or going through a difficult time’ (McGill, 2015).
Gascoigne noted various benefits to his transparent management style, the top being ‘increased level of trust between both team members and also customers, where Buffer are seen as dependable and will keep customers informed of important issues’ as soon as possible (McGill, 2015). Moreover, the interview revealed Gascoigne’s transparent management encourages trust, holds the organisation to a higher standard and brings justice, where transparency is a tool that helps others in the organisation, and lastly, the transparency leaves Buffer open to feedback from employees, customers and the general public (McGill, 2015; Davis, 2015).
Examples of Gascoigne’s transparent management include the publications of all emails sent internally within the company, disclosing behind the scenes information on their revenue, openly sharing employee salaries and equity, their pitch deck/valuation information and explanation of where customer money goes (Davis, 2015; McGill 2015; Kopprasch, 2016). Not only did Buffer’s management demonstrate how they value their employee’s views of the organisation by disclosing private information, they also demonstrated how they valued their employee’s health and wellbeing by providing employees with Jawbone UP wristbands (Clapon, 2016).
In the following video, Leo Widrich, the co-founder of Buffer, discusses the power of being a transparent manager and how it has added value to their organisation, much of which mirrors the view of Joel Gascoigne.
3.2 Kenneth Lay – The Corrupt Manager
Kenneth Lay helped create Enron in 1985 as a natural gas provider and presided as it grew into an energy-trading behemoth declaring one of the biggest bankruptcies ever on December 2nd 2001 (Time, 2016; The Economist, 2002). Enron’s failure came down to failed investment in overseas ventures and the unravelling of a serious of dubious limited partnerships (Johnson, 2003), however much of Lay’s downfall was due to his lack of transparency as a manager.
Viewmixed, 2015
Kenneth Lay took a centralised approach to decision making. Centralised decision-making involves decisions mainly being made unilaterally and disregarding other opinions (Steers et al., 2013). Lay employed complete control over the majority of Enron’s decisions, taking on minimal views from member of his board (da Silveira, 2013). This meant at times, managers did not understand what employees were doing or how the business was being operated (Johnson, 2003).
Kenneth Lay was more interested in self-promotion than in managing daily operations and put himself above key stakeholders within the business and betrayed his employees (da Silveira, 2013; Johnson 2003). Enron officials such as Lay, manipulated information to display optimistic earnings reports and hide losses to keep the stock price artificially high to protect management interests and deceive the public (Johnson, 2003). To summarise, although fraudulent activity was part of the reason for the collapse of Enron, the manipulative, non-transparent way that Kenneth Lay operated was the primary reason for the downfall.
4. Management Transparency Related Outcomes
4.1 Corporate Governance System
Corporate governance systems concerns the control of a corporation, vested in the board of directors who play a crucial coordinating role to balance the interests of various stakeholders (both internal and external) and achieve sustainable profits (Fung, 2014). Corporate governance should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities (OECD, 2004).
Corporate governance has attracted a great deal of attention over the last two decades because of the apparent importance for economic heath of businesses and society (Kummamuru, 2016). The corruption of organisations such as Enron due to their unethical leadership and false disclosed information to achieved short-term goals caused the need for corporate governance systems (Kummamuru, 2016; Johnson 2003). Only with greater transparency can it be possible for managers to defer frauds, embezzlements and financial scandals and foster efficiency in allocation of resource decisions, whilst avoiding scrutiny (Fung, 2014). Transparency can be achieved through making full and prompt disclosure of company information and make disclosure of conflicts of interests of the directors or controlling shareholders (Fung, 2014).
4.2 Improved Employee Engagement
A recent survey conducted by TINYpulse (2013), a company who provide employee engagement surveys, analysed 40,000 responses and found uncovered workplace trends that need more attention such as management transparency.
The survey found that:
Management transparency is the top factor when determining employee happiness/engagement with an extremely high correlation coefficient of 0.937. Although TINYpulse noted this as a surprising find, it is evident today there is a demand for management transparency as more and more organisation are using transparency as a major aspect in the attracting and retaining of talent. Leo Widrich, the co-founder of Buffer released the following statement in relation to his transparent management:
“To us, transparency isn't a buzzword-it's a huge competitive advantage when everyone knows what everyone is working on and getting done. It seems obvious, right? But I'm constantly shocked by how many companies say they understand the importance of transparency but don't make any steps to make their companies more transparent.” (cited in TINYpulse, 2013).
82% of employees claim their manager clearly outlines their role and responsibilities meaning that managers are acting transparently through providing clarity to employees of their expectations, however…
Only 42% of employees knew their organisations visions, mission and values which suggests that manager’s are limiting the information they disclose with employees, this may be because they themselves do not understand the company’s culture. Dan MacPherson, Modern Survey’s CEO stated that:
“Those who says the company’s values are ‘’known and understood’’ are 30 times more likely to be fully engaged” (cited in TINYpulse, 2013).
Team play and collaboration are the top trait employee’s love about their co-workers this demonstrates that employees are openly working transparently, which is likely to be encouraged by managers.
Transparency is one of the lowest to not cost initiatives to improve organisational management was the conclusion of the survey. Despite being cost efficient, it is the commitment of the managers to be transparent will be the first factor of implementation.
5. The Paradoxes of Management Transparency
In recent literature, management transparency presents itself as a paradox in many ways and situations because of the techniques used to achieve it often undermine themselves (Wilson, 2009). Firstly, there are conflicting arguments as to how transparency is determined. Kant argued that judgements are based on individual experiences, and mathematical judgements are not based on experience, but are a priori judgement (Shabel, 2013). In contrast, Collins and Pinch (1998) argue mathematical law attains the greatest possible transparency of argument because it makes accurate replication of results (cited in Wilson, 2009). Therefore there is question over whether management transparency can be truly observed.
Moreover, Bernstein’s (2012) study into privacy in organisations found a paradox in management transparency. Although he does not challenge the value of transparency, he highlights whether the presence of managers overseeing employee activities can affect employee performance in negative ways. Today, the workplace is increasing in the use of monitoring software’s, sensors and cameras to monitor employees (Tavis, 2016). Bernstein’s (2012) results showed that limited management involvement did not cause employees to ‘slack’ or cut corners, but improved transparency in the line, improved productive deviance, experimentation and focus.
Robin D. Richards supports the views of Bernstein in suggesting that a management transparency paradox solution can be possible when “products are designed to respect, not correct, the human instincts for privacy and safety”(cited in Tavis, 2016). Bernstein (2014) further suggests how the promotion of collaboration and shared learning could trigger distortions of fact and counterproductive inhibitions, which cause employees to go to great lengths to keep what they are doing private. However, this kind of activity normally causes management to monitor employee more intensely to understand the lack of transparency. Bernstein (2014) encourages transparent managers to use team boundaries to improve teamwork, efficiency, transparency and accounting within employees by creating boundaries between evaluation and feedback, decision rights and improvement rights and the amount of time to work privately. For further information on paradox solutions, please click here.
6. Sanctioned Secrets
Although management transparency is generally encouraged for the reasons of improved employee engagement and customer trust, management can reduce disclosure through sanctioned secrets without being unethical. Management may decide to use sanctioned secrets to benefit the organisation as a whole to increase competitive advantage (Schnackenberg and Tomlinson, 2014; Anand and Rosen, 2008).
This is the case with KFC, where the key to their success and biggest of point of differentiation being a secret recipe. Anand and Rosen (2008) questioned whether sanctioned secrets could be considered ethical. However KFC’s sanctioned secret was considered legitimate by the key shareholders (Schnackenberg and Tomlinson, 2014). Nonetheless, it is vital to consider that the exposure to KFC’s organisational secret could place employees in an ethical conundrum, where employees are expected to whistle blow unethical acts, but breaking the secrecy may seem unethical to management (Anand and Rosen, 2008). The following video explains how KFC maintain their sanctioned secret without placing employees in an unethical situation by only allowing two KFC executives access to the recipe.
7. Conclusion
7.1 Is it a New Trend in Management?
Discussion and application of management transparency has arisen academic attention due to the new market crisis that occurred in the year 2000, the current financial crisis and the critique of large bureaucratic institutions like the EU (Wehmeier and Raaz, 2012). The crisis in the ‘new market’ and the current financial crisis have increased the demand in transparency, partly due to a new regulation reporting and financial disclosure (Wehmeier and Raaz, 2012). The following graph, demonstrates the increase in the use of ‘management transparency’ in literature since the late 1990s and early 2000s.
After a sharp increase in interest of management transparency, in 1990-1992, which then decreased again, since 1996 the presence of management transparency in literature has remained a present trend in books tracked by Google (see Figure 1).
Management transparency has become constant management concept of today. The Sodexo Workplace Trends Report (2015) supports this through findings where employees and consumers are gaining greater influence over corporations’ behaviour down to a surge in e-commerce and social sharing. The report explains the new form of public accountability, “Rateocracy”, is putting unprecedented pressure on companies to act transparently. Today, employees and customer can instantly share their view on a company with the world through online reviews and social media, and this could affect the experiences of employees and managers. Therefore, concerns like morale, transparency and fairness become integral in the way that businesses are managed (Sodexo, 2015).
Management transparency has become a new trend in management, specifically within manufacturing, such as through the use of transparent supply chains. Today, management encourage that nearly all actions and performance of employees, line and functions are observable in order to improve it (Bernstein, 2012). Only within the last few years have organisation realised the benefits of adding transparency to their management strategy such as improvements to engagement, clarity of understanding decisions and trust between employee and manager, which is creating a flatter hierarchy. However, organisations need to ensure that they are ethical in their implementation of management transparency. As Kant (1996) said, treat it as a means to an end, not an end in itself. This means that management should still act transparently however this does not mean making every aspect of the organisation transparent. Managers need to respect that employees may like to be private, whilst still working ethically.
8. References
Anand, V. and Rosen, C. (2008). The Ethics of Organizational Secrets. Journal of Management Inquiry, 17(2), pp.97-101.
Bernstein, E. (2012). The Transparency Paradox: A Role for Privacy in Organizational Learning and Operational Control. Administrative Science Quarterly 57(2): 181-216.
Bernstein, E. (2014). Making Transparency Transparent: The Evolution of Observation in Management Theory. Academy of Management Annals.
Ferreira, D. and Rezende, M. (2007). Corporate strategy and information disclosure. The RAND Journal of Economics, 38(1), pp.164-184.
Fung, B. (2014). The Demand and Need for Transparency and Disclosure in Corporate Governance. Universal Journal of Management, [online] 2(2), pp.72-80. Available at: http://www.hrpub.org/download/20140105/UJM3-12101630.pdf [Accessed 6 Feb. 2017].
Grunstra, B., Ackoff, R., Gupta, S. and Minas, J. (1965). Scientific Method: Optimizing Applied Research Decisions. Philosophy and Phenomenological Research, 25(4), p.594.
Norman, S., Avolio, B. and Luthans, F. (2010). The impact of positivity and transparency on trust in leaders and their perceived effectiveness. The Leadership Quarterly, 21(3), pp.350-364.
OECD, (2004). Principles of Corporate Governance. Paris: OECD, pp.17-24.
Schnackenberg, A. (2002). Measuring Transparency: Towards a Greater Understanding of Systemic Transparency and Accountability. Weatherhead School of Management.
Schnackenberg, A. and Tomlinson, E. (2014). Organizational Transparency: A New Perspective on Managing Trust in Organization-Stakeholder Relationships. Journal of Management, 42(7), pp.1784-1810.
Steers, R.M., Sánchez-Runde, C., Nardon, L. and Sanchez-Runde, C.J. (2013) Management across cultures: Developing global competencies. 2nd ed. Cambridge, UK: Cambridge University Press.
von Furstenberg, G. (2001). Hopes and delusions of transparency. The North American Journal of Economics and Finance, 12(1), pp.105-120.
Walumbwa, F., Luthans, F., Avey, J. and Oke, A. (2011). Retracted : Authentically leading groups: The mediating role of collective psychological capital and trust. Journal of Organizational Behavior, 32(1), pp.4-24.
Wehmeier, S. and Raaz, O. (2012). Transparency matters: The concept of organizational transparency in the academic discourse. Public Relations Inquiry, 1(3), pp.337-366.
Wilson, D. (2009). The paradoxes of transparency. Amsterdam: Amsterdam University Press, pp.79-87.
1. Introduction and Background
Table of Contents
‘42% of people around the world are not sure whether to trust companies’ (The Guardian, 2014).
Today, various stakeholders are demanding transparency from their organisation in order to understand and trust them (Wemeier and Raaz, 2012). Transparency is defined as ‘the extent to which a stakeholder perceives a firm’s conduct is open and forthright regarding matters relevant to the stakeholder’ (Dapko, 2012). In order for an organisation to become transparent, there must be direction from the management.
The term management transparency describes where managers reveal (both up the organisation and down) the decisions that they have made and why they are made (Pitsel, 2016). The definition of ‘transparency’ has expanded to include ‘openness’, ‘freedom of information’, ‘clarity’, ‘accuracy’, ‘truth’ and the timely release of relevant information, which should all be evident in a transparent management style (Collins, 2008; Hood, 2006; Schnackenberg and Tomlinson, 2014, cited in Bernstein, 2014). The definitional expansions have caused transparency to become one of the great themes in management theory today (Bernstein, 2014).
Management transparency highlights than an individual, like a key stakeholder should be able to observe the activity and reasons behind a decision. Observation has been a key aspect of management since the late 1920's and 1930's where Elton Mayo and team of researchers studied the effects of changes to the work environment (e.g. changes in lighting, work hours, rest breaks, and food eaten during breaks) on productivity (cited in Bernstein, 2014). Studying the changes in work environment was a preliminary investigation of management transparency, since the organisation were revealing why these changes were being implemented. The research found the famous, yet controversial findings of the Hawthorne Effect, where researches claimed that workers productivity increased when they knew they were being studied, which led to them examining workers as people to explain productivity (Bernstein, 2014). Examination of the workers as people was likely to lead to the investigation of management transparency, however, this would not be considered a concept until a later date. Further research may involve management transparency when investigating why individuals were employed (e.g. do they fit the company culture?), do employees work better when monitored by their management or does open communication with management improve productivity?
The European Directive was created in 2014, which requires businesses to disclose non-financial and diversity information to increase transparency (CSR Europe, 2014). This encouraged the move from management transparency being a concept, to a reality. Management are required to report on corporate issues such as human rights management, board diversity, sustainability approaches, due diligence, risk assessment and more (CSR Europe, 2014).
Scholars link management transparency to positive organisational outcomes and as a ‘antidote to mismanagement and corruption’ (Norman et al., 2010; von Furstenberg, 2001). However, many business leaders still fear that greater public disclosure will leave them vulnerable to criticism (The Guardian, 2014).
2. The Three Dimensions of Transparency
Despite most researching assuming transparency to be a un-dimensional construct, transparency is made up of three specific dimensions: information disclosure, clarity and accuracy (Schnackenberg and Tomlinson, 2014). Management should display these three dimensions in their leadership to appear transparent.2.1 Information Disclosure
Perotti and von Thadden (2005) refer to information disclosure as the perception of transparency that is built around a stakeholder’s ability to gather needed information about a firm (cited in Schnackenberg and Tomlinson, 2014). Therefore, if management are unable to openly disclose information to a stakeholder, they cannot be transparent. Information disclosure also includes an explanation of why something’s go wrong, openly shared information and a manager disclosing their personal values, motives and sentiments in a manner that enables followers/subordinates to more accurately assess the competence and morality of their manager’s actions (Higgins, 2005; Schnackenberg and Tomlinson, 2014; Norman et al., 2010).Annual reports are a form of organisational information disclosure. Most information provided by firms in their annual reports are not required by laws (Botosan, 1997 cited in Ferreira and Rezende, 2007). Ferreira and Rezende’s (2007) investigated voluntary disclosures of corporate strategies and developed a model where managers chose whether to reveal their strategic plans only to some stakeholders of the firm or also the outside world. The results of their investigation provide an understanding for managers of the costs and benefits of nonfinancial disclosures rather than the ‘potential benefits’.
They concluded that when managers voluntarily disclose private information about corporate strategy, they tend to ensure the information is credible since if incorrect it could damage their reputation. Moreover, managerial voluntary public disclosures of information can be value adding due to their positive effects on stakeholder incentives such as undertaking investment (Ferreira and Rezende, 2007). Their research suggests that in the last decade there has been an encouragement for managers to disclose information, rather than only considering it such as indicated by previous studies (Amir and Lev 1996; Narayanan et al., 2000 cited in Ferreira and Rezende, 2007).
2.2 Clarity
Clarity is regarded as the perceived level of lucidity and comprehensibility of information received from a sender with limited ambiguity (Schnackenberg and Tomlinson, 2014). Daft and Lengel (1986) found that a major problem for managers was the lack of information clarity rather than a lack of sheer data. Managers can improve clarity by removing concealed symbols and technical organisational jargon (Grunstra et al., 1965). The component of clarity is interactive with both the quantity of information disclosed and accuracy in management (Schnackenberg, 2002). Therefore, in order to for management to act transparently, followers must not only be able to see what is going on, but understand what is going on. Relevant information needs to be disclosed to employees in a way that they can comprehend.2.3 Accuracy
Accuracy refers to information that is assumed to be correct in the circumstance, and therefore more reliable. It is assumed that most managers have an accurate perception of their organisation (Mezias and Starbuck, 2003). Information cannot be considered transparent or accurate if it is purposefully biased or unfoundedly contrived (Walumbwa et al., 2011). Moreover, if information is considered inaccurate, this will reduce management transparency and prompt corporate scandals (Akhigbe and Martin, 2006, cited in Schnackenberg and Tomlinson, 2014). Ferreira and Rezende’s (2007) investigation highlighted that good managers are those who disclose accurate information. If a manager suggests a given strategic direction for the firm and later decides to change it, they signal to the market that their initial information was not accurate (Ferreira and Rezende, 2007).3. Case Studies
3.1 Joel Gascoigne - The Transparent Manager
Joel Gascoigne is the CEO of the social media management tool, Buffer (Buffer, 2017). Gascoigne has drawn attention to his organisation through his open, transparent approach to management. In an interview with Gascoigne, he described ‘transparency as the core value of Buffer, regardless of whether the organisation is seeing growth or going through a difficult time’ (McGill, 2015).Gascoigne noted various benefits to his transparent management style, the top being ‘increased level of trust between both team members and also customers, where Buffer are seen as dependable and will keep customers informed of important issues’ as soon as possible (McGill, 2015). Moreover, the interview revealed Gascoigne’s transparent management encourages trust, holds the organisation to a higher standard and brings justice, where transparency is a tool that helps others in the organisation, and lastly, the transparency leaves Buffer open to feedback from employees, customers and the general public (McGill, 2015; Davis, 2015).
Examples of Gascoigne’s transparent management include the publications of all emails sent internally within the company, disclosing behind the scenes information on their revenue, openly sharing employee salaries and equity, their pitch deck/valuation information and explanation of where customer money goes (Davis, 2015; McGill 2015; Kopprasch, 2016). Not only did Buffer’s management demonstrate how they value their employee’s views of the organisation by disclosing private information, they also demonstrated how they valued their employee’s health and wellbeing by providing employees with Jawbone UP wristbands (Clapon, 2016).
In the following video, Leo Widrich, the co-founder of Buffer, discusses the power of being a transparent manager and how it has added value to their organisation, much of which mirrors the view of Joel Gascoigne.
3.2 Kenneth Lay – The Corrupt Manager
Kenneth Lay helped create Enron in 1985 as a natural gas provider and presided as it grew into an energy-trading behemoth declaring one of the biggest bankruptcies ever on December 2nd 2001 (Time, 2016; The Economist, 2002). Enron’s failure came down to failed investment in overseas ventures and the unravelling of a serious of dubious limited partnerships (Johnson, 2003), however much of Lay’s downfall was due to his lack of transparency as a manager.Kenneth Lay took a centralised approach to decision making. Centralised decision-making involves decisions mainly being made unilaterally and disregarding other opinions (Steers et al., 2013). Lay employed complete control over the majority of Enron’s decisions, taking on minimal views from member of his board (da Silveira, 2013). This meant at times, managers did not understand what employees were doing or how the business was being operated (Johnson, 2003).
Kenneth Lay was more interested in self-promotion than in managing daily operations and put himself above key stakeholders within the business and betrayed his employees (da Silveira, 2013; Johnson 2003). Enron officials such as Lay, manipulated information to display optimistic earnings reports and hide losses to keep the stock price artificially high to protect management interests and deceive the public (Johnson, 2003). To summarise, although fraudulent activity was part of the reason for the collapse of Enron, the manipulative, non-transparent way that Kenneth Lay operated was the primary reason for the downfall.
4. Management Transparency Related Outcomes
4.1 Corporate Governance System
Corporate governance systems concerns the control of a corporation, vested in the board of directors who play a crucial coordinating role to balance the interests of various stakeholders (both internal and external) and achieve sustainable profits (Fung, 2014). Corporate governance should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities (OECD, 2004).Corporate governance has attracted a great deal of attention over the last two decades because of the apparent importance for economic heath of businesses and society (Kummamuru, 2016). The corruption of organisations such as Enron due to their unethical leadership and false disclosed information to achieved short-term goals caused the need for corporate governance systems (Kummamuru, 2016; Johnson 2003). Only with greater transparency can it be possible for managers to defer frauds, embezzlements and financial scandals and foster efficiency in allocation of resource decisions, whilst avoiding scrutiny (Fung, 2014). Transparency can be achieved through making full and prompt disclosure of company information and make disclosure of conflicts of interests of the directors or controlling shareholders (Fung, 2014).
4.2 Improved Employee Engagement
A recent survey conducted by TINYpulse (2013), a company who provide employee engagement surveys, analysed 40,000 responses and found uncovered workplace trends that need more attention such as management transparency.The survey found that:
“To us, transparency isn't a buzzword-it's a huge competitive advantage when everyone knows what everyone is working on and getting done. It seems obvious, right? But I'm constantly shocked by how many companies say they understand the importance of transparency but don't make any steps to make their companies more transparent.” (cited in TINYpulse, 2013).
“Those who says the company’s values are ‘’known and understood’’ are 30 times more likely to be fully engaged” (cited in TINYpulse, 2013).
5. The Paradoxes of Management Transparency
In recent literature, management transparency presents itself as a paradox in many ways and situations because of the techniques used to achieve it often undermine themselves (Wilson, 2009). Firstly, there are conflicting arguments as to how transparency is determined. Kant argued that judgements are based on individual experiences, and mathematical judgements are not based on experience, but are a priori judgement (Shabel, 2013). In contrast, Collins and Pinch (1998) argue mathematical law attains the greatest possible transparency of argument because it makes accurate replication of results (cited in Wilson, 2009). Therefore there is question over whether management transparency can be truly observed.Moreover, Bernstein’s (2012) study into privacy in organisations found a paradox in management transparency. Although he does not challenge the value of transparency, he highlights whether the presence of managers overseeing employee activities can affect employee performance in negative ways. Today, the workplace is increasing in the use of monitoring software’s, sensors and cameras to monitor employees (Tavis, 2016). Bernstein’s (2012) results showed that limited management involvement did not cause employees to ‘slack’ or cut corners, but improved transparency in the line, improved productive deviance, experimentation and focus.
Robin D. Richards supports the views of Bernstein in suggesting that a management transparency paradox solution can be possible when “products are designed to respect, not correct, the human instincts for privacy and safety”(cited in Tavis, 2016). Bernstein (2014) further suggests how the promotion of collaboration and shared learning could trigger distortions of fact and counterproductive inhibitions, which cause employees to go to great lengths to keep what they are doing private. However, this kind of activity normally causes management to monitor employee more intensely to understand the lack of transparency. Bernstein (2014) encourages transparent managers to use team boundaries to improve teamwork, efficiency, transparency and accounting within employees by creating boundaries between evaluation and feedback, decision rights and improvement rights and the amount of time to work privately. For further information on paradox solutions, please click here.
6. Sanctioned Secrets
Although management transparency is generally encouraged for the reasons of improved employee engagement and customer trust, management can reduce disclosure through sanctioned secrets without being unethical. Management may decide to use sanctioned secrets to benefit the organisation as a whole to increase competitive advantage (Schnackenberg and Tomlinson, 2014; Anand and Rosen, 2008).This is the case with KFC, where the key to their success and biggest of point of differentiation being a secret recipe. Anand and Rosen (2008) questioned whether sanctioned secrets could be considered ethical. However KFC’s sanctioned secret was considered legitimate by the key shareholders (Schnackenberg and Tomlinson, 2014). Nonetheless, it is vital to consider that the exposure to KFC’s organisational secret could place employees in an ethical conundrum, where employees are expected to whistle blow unethical acts, but breaking the secrecy may seem unethical to management (Anand and Rosen, 2008). The following video explains how KFC maintain their sanctioned secret without placing employees in an unethical situation by only allowing two KFC executives access to the recipe.
7. Conclusion
7.1 Is it a New Trend in Management?
Discussion and application of management transparency has arisen academic attention due to the new market crisis that occurred in the year 2000, the current financial crisis and the critique of large bureaucratic institutions like the EU (Wehmeier and Raaz, 2012). The crisis in the ‘new market’ and the current financial crisis have increased the demand in transparency, partly due to a new regulation reporting and financial disclosure (Wehmeier and Raaz, 2012). The following graph, demonstrates the increase in the use of ‘management transparency’ in literature since the late 1990s and early 2000s.Figure 1: Management Transparency Appearances in Text
Source: Google Books Ngram Viewer
After a sharp increase in interest of management transparency, in 1990-1992, which then decreased again, since 1996 the presence of management transparency in literature has remained a present trend in books tracked by Google (see Figure 1).
Management transparency has become constant management concept of today. The Sodexo Workplace Trends Report (2015) supports this through findings where employees and consumers are gaining greater influence over corporations’ behaviour down to a surge in e-commerce and social sharing. The report explains the new form of public accountability, “Rateocracy”, is putting unprecedented pressure on companies to act transparently. Today, employees and customer can instantly share their view on a company with the world through online reviews and social media, and this could affect the experiences of employees and managers. Therefore, concerns like morale, transparency and fairness become integral in the way that businesses are managed (Sodexo, 2015).
Management transparency has become a new trend in management, specifically within manufacturing, such as through the use of transparent supply chains. Today, management encourage that nearly all actions and performance of employees, line and functions are observable in order to improve it (Bernstein, 2012). Only within the last few years have organisation realised the benefits of adding transparency to their management strategy such as improvements to engagement, clarity of understanding decisions and trust between employee and manager, which is creating a flatter hierarchy. However, organisations need to ensure that they are ethical in their implementation of management transparency. As Kant (1996) said, treat it as a means to an end, not an end in itself. This means that management should still act transparently however this does not mean making every aspect of the organisation transparent. Managers need to respect that employees may like to be private, whilst still working ethically.
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